The High Court have decided a case in favour of ABN Ambro Bank NV. The Bank had been pursuing Totisa Holdings SA for unpaid sums under a facility agreement. This agreement contained a no set-off clause
Whilst the parties accepted that the Bank was owed the monies, Totisa argued that the enforcement by the Bank should be held until its counterclaim had been heard.
Totisa's counterclaim was that the Bank had deliberately breached the agreement by refusing to lend a final installment to it, and that as a result, Totisa had no funds.
The Court held that even if the consequences of the Bank's alleged breach of the agreement were as disastrous for Totisa as suggested, the evidence was not of the quality necessary to show that the consequences were as serious as contended.
The Court gave great weight to the no set-off clause as it reflected the intention of commercial parties under an agreement.
The presence of the no set-off clause in the facility agreement suggested that the parties had agreed at the outset that if there was an argument over whether a party had complied with the agreement, the correct outcome was that the claim be paid and any counter claim be a matter for separate pursuit.
This will bring comfort to lenders who rely on their no set off clauses in security documentation.